Sir Richard Branson has warned that Edinburgh risks chasing tourists away to Glasgow if it goes it alone in bringing in a tourist tax.

Speaking during a visit to the site of his new Virgin Hotel in Edinburgh’s Old Town, he said there was a “serious danger” it could deter potential visitors if it introduced such a scheme in isolation.

Sir Richard Branson says he picked Edinburgh because there was a gap in the market for high-end hotels. Picture: Getty Images

Sir Richard, who hosted a party for industry leaders to herald the start of work on what will become the first Virgin Hotel in Europe when it opens in 2020, insisted the development would respect the heritage of the site. He said he had selected Edinburgh for his new brand because the city had a “big gap in the market” for high-end five-star hotels.

Sir Richard revealed ambitions to expand the brand to Glasgow, where his wife Joan was brought up, if he finds the right site.

The businessman said he would only endorse the idea of a tourist tax if it was introduced across the UK but also raised concerns about the possibility of income raised from the new tax “disappearing” if it was not made clear how it was to be re-invested in the tourism industry.

Sir Richard also said his “five-star” venture at India Building, on Victoria Street, would be an antidote to hotels run by chains like Hilton and insisted it would fill a “gap” at the high end of the hotel market in the Scottish capital. He revealed that up to 300 jobs will be created in the 225-room hotel, which will contain at least four bars and restaurants.

Just one Virgin Hotel is operational at the moment, in Chicago, although work is underway on others in San Francisco, Nashville, Dallas and New York, while others are planned in New Orleans, Silicon Valley and Palm Springs.

Sir Richard entered Edinburgh’s increasingly heated tourist tax debate days after a new poll found three-quarters of small businesses in the city were opposed to the idea.

Asked about the prospects of Edinburgh becoming the first destination in the UK to ask visitors to pay an additional levy, Sir Richard said: “There is a problem with any tax where an individual city is singled out. The government would have to watch it very carefully.

“There is a danger that if it is done in one city [Edinburgh] you could have everyone going to Glasgow. If you’re going to do it, it would be better if it was done nationwide.

“It would also have to genuinely support the tourism industry and not just disappear into a general pot.”

Asked about the possibility of other Virgin Hotels in Scotland, Sir Richard said: “I can definitely envisage us opening in Glasgow if we can find the right building. Our team are definitely out there looking. If we can find one I know I would be forever popular with my wife.”

Sir Richard was visiting Edinburgh just days after a long-running heritage watchdog urged the city council to introduce an “immediate moratorium” on new hotels in the Old Town over concerns that they are putting its historic character and vitality “seriously at risk.” Earlier this year an official report warned that parts of the Old and New Towns were struggling to cope with the huge influx of visitors during peak periods.